Key U.S. Data Releases and Events

This week's release will be mostly positive, showing an economy slowly on the mend. But they will also support the view that the recovery will be U-shaped, not the normal V.

KEY U.S. DATA RELEASES THIS WEEK

Tuesday, August 25 – Conference Board Consumer Confidence (Aug.)

• IHS Global Insight: 51.0
• Consensus: 47.6
• Last Actual: 46.6 (Jul.)

What to Look For

We expect the Conference Board's Consumer Confidence Index to rise to 51.0 in August, still subdued but showing a little improvement after declines in June and July.

Implications

We expect that real consumer spending will rise at a 2–3% annual rate in the third quarter, led by a rebound in light-vehicle sales. Other segments of the consumer market remain weak.

Wednesday, August 26 – Durable Goods Orders (Jul.)

• IHS Global Insight: 5.6%
• Consensus: 3.0%
• Last Actual: -2.2% (Jun.)

What to Look For

Durable goods orders should climb a steep 5.6% in July. Boeing took more orders than were cancelled, defense ordering should have rebounded after a June drubbing, and light-vehicle producers were back at their desks taking orders after bankruptcy-related shutdowns in June.

Implications

The bellwether demand indicator—nondefense capital equipment orders excluding aircraft—is now edging higher. We expect equipment spending to begin its recovery in the second half of the year.

Wednesday, August 26 – New Home Sales (Jul.)

• IHS Global Insight: 0.410 Mil.
• Consensus: 0.390 Mil.
• Last Actual: 0.384 Mil. (Jun.)

What to Look For

• Sales to rise by over 5%.
• The 26th-straight monthly decline in the number of unsold new homes.

Implications

Sales are up. A big question mark is how much of the sales increase is coming from new homeowners taking advantage of the up-to-$8,000 tax credit that expires on November 30. The credit appears to be having a significant impact. If this is the case, and if the credit is not extended, sales will take a hit after the credit expires.

Thursday, August 27 – Real Gross Domestic Product, Preliminary (Q2)

• IHS Global Insight: -1.6%
• Consensus: -1.4%
• Last Actual: -1.0% (Advance, Q2)

What to Look For

We expect the initial estimate of a 1.0% GDP decline in the second quarter to be revised to a 1.6% decline, largely due to lower estimates for nonresidential construction and inventories. The nonresidential construction revision is a reminder that this sector is still struggling. The inventories revision is good news because it indicates that the inventory adjustment is further along than thought, setting the stage for increased production in coming months.

Implications

The revision is mainly of historical interest. It will show that real GDP dropped 4.0%, peak-to trough, during this recession (not 3.9%, as reported in the Advance release). This recession was already the deepest and longest since the 1930s.

Friday, August 28 – Personal Income, Consumption and Prices (Jun.)

Personal Consumption, Nominal

• IHS Global Insight: 0.3%
• Consensus: 0.2%
• Last Actual: 0.4% (Jun.)

Personal Consumption, Real

• IHS Global Insight: 0.3%
• Last Actual: -0.1% (Jun.)

Core PCE Price Index

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: 0.2% (Jun.)

Personal Income

• IHS Global Insight: 0.1%
• Consensus: 0.1%
• Last Actual: -1.3% (Jun.)

What to Look For

• We are expecting a small gain in labor compensation, since, according to the July Employment Report, aggregate hours were flat in July, while average hourly earnings were up 0.2%. However, except for rental income and transfer payments, most other personal income sources will be flat or down.
• July consumer spending will be weak across the board except for spending on autos. The Cash for Clunkers program should give this category a boost in both July and August. For July, spending will be up 0.3%, in both nominal and real dollars, with inflation at zero.
• We are expecting a small increase in the core price deflator, based on July's 0.1% increase in the core CPI. Year-on-year, the core will be up 1.4%, below June's 1.5% rate. With the economy getting back on track, but the unemployment rate remaining high, we expect core inflation to linger at about this rate for some time.

Implications

The consumer remains the weak link in the recovery. Consumers will spend when the deal is attractive enough, as shown by the success of Cash for Clunkers. But incomes have taken a beating from declining employment, low wage increases or wage cuts, and short working hours, while debt burdens remain high, and wealth losses remain heavy despite the recent improvement in the stock market. Spending fell 1.2% in the second quarter, and although we expect it to rise 2.5% in the third, that is almost all due to Cash for Clunkers.

Friday, August 28 – Michigan Consumer Sentiment Index, final (Aug.)

• IHS Global Insight: 64.0
• Consensus: 64.3
• Last Actual: 63.2 (preliminary, Aug.)

What to Look For

The Reuters/University of Michigan Consumer Sentiment Index is expected to average 64.0 in August, up slightly from its preliminary reading of 63.2 but still below its June level.

Implications

Consumer finances are strained by job losses and sluggish wage gains, while the stock market rally has restored only a small fraction of the cumulative decline in household net worth since mid-2007.